Day: July 21, 2011

Thursday, 21 July 2011

08:24 – Watching the antics of the German and French leaders in the hours before the euro crisis summit, I was reminded of Butch Cassidy and the Sundance Kid, when Butch and Sundance were working as payroll guards:

Butch Cassidy: I think they’re in the trees up ahead.
Sundance Kid: In the bushes on the left.
Butch Cassidy: I’m telling you they’re in the trees up ahead.
Sundance Kid: You take the trees, I’ll take the bushes.
Percy Garris: Will you two beginners cut it out.
Butch Cassidy: Well, we’re just trying to spot an ambush, Mr. Garris.
Percy Garris: Morons. I’ve got morons on my team. Nobody is going to rob us going down the mountain. We have got no money going down the mountain. When we have got the money, on the way back, then you can sweat. .

But, after seven hours of discussion, Merkel and Sarkozny apparently got some sort of agreement hashed out. Once again, one of the scenes from the movie sums it up.

Merkel: Alright. I’ll jump first.
Sarkozy: No.
Merkel: Then you jump first.
Sarkozy: No, I said.
Merkel: What’s the matter with you?
Sarkozy: I can’t swim.
Merkel: Are you crazy? The fall will probably kill you.

The early news from the conference isn’t good. Apparently, the bank tax is off the table, not that it would have done much good anyway. It seems that Eurobonds are the last option left, and I can’t see Germany, Austria, Holland, and Finland agreeing to those. The other option is boosting the EU bailout fund and allowing it to purchase junk bonds from the troubled Eurozone nations, but that’s not doable in the short term.

More lab work today.

13:32 – Oh, my. Things have already started to unravel. The main goal of the crisis summit wasn’t to save Greece. Greece is unsavable, and everyone was perfectly aware of that. The real goal was to stop the spread of “contagion” to Spain and Italy. It’s too late for that. Spain and Italy are already infected, and nothing done at the summit can change that. Spain today auctioned €1.8 billion in 10-year debt, a set-piece low face-value auction intended to demonstrate the beneficial effects of the summit. It instead demonstrated the opposite. The average yield was very close to 6%, a yield that most economists consider to be in the extremely dangerous range. Although estimates differ slightly, most would agree that 6% to 6.5% is disastrous and 7% undoubtedly fatal.

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